When I joined my family company a few years ago, fresh out of college, I was determined to work hard and prove my worth, but always had a “Don’t mess this up” post-it stuck at the back of my head.
First-generation (G1) business founders are not only praised in the corporate world, but are most importantly treated like war heroes at home and rightfully so. Especially in emerging markets like India, success did not come easy—information was hidden, the capital was scarce and talent was absent. Building companies in those times and carrying them forward required G1s to be exceptional risk-takers and dynamic.
Most of their key decisions had been taken from the gut and not with the help of big data analytics. Following those footsteps can be intimidating and seem impossible, so what should I have done? Manage passively and just follow the norm?
With a few more years of experience, a recession and a pandemic under my belt, I believe next-gens must do everything the same, but differently. This means we must embody the core entrepreneurial spirit and intense desire to learn as our predecessors but need to adapt our business in a far more complex environment.
Next-gens play a key role in professionalising management and taking new initiatives to carry the business forward. They must think in a much more global way and understand the relevance of their product, operating model and strategy, keeping technology in mind, both as a threat and an advantage. Next-gens will most likely take crucial decisions that may even involve selling the company or parts of it, to re-allocate capital to more value-creating areas. At times like that, a passive management mindset is not going to work.
Sounds great, but how?
Firstly, next-gens should engage the family as well as long-standing employees and advisers in strategic planning workshops. In this manner the vision, core values and principles are well documented. This exercise will ensure that all the factors that have contributed to the success of the business do not fade away and are absorbed by the incoming generation.
More importantly, it will allow an open discussion and a structured approach for hearing out members of the family across the board. G1s will get to reflect on their successes and failures while the younger members of the family will get a chance to promote more progressive ideas, highlighting aspects that matter to future audiences. It will create a sense of mutual respect and admiration amongst the family and serve as a charter to guide all future decisions, big or small.
Secondly, next-gens must prepare the business for scale. Implementation of processes and systems by using technology as a catalyst can evolve the enterprise multi-fold and ensure its longevity. This is especially relevant in current times where average employment tenures are reducing and the workforce is becoming more flexible. Be it work from home or the creation of more temporary roles, next-gens can formulate their business models so that work can be carried out anywhere and by anyone via standardised training and remote learning.
To initiate and execute this transformation, next-gens might need to bring in a new advisory team that vouch for this type of change and have a reputable track record. There will be times where the older business teams will fear the staff turnover and automation of roles as it might threaten their status or endanger their influence over key decisions, even though some of these changes would be long overdue. This team will play an important mediating role and bring confidence in the change management process, especially to the G1s.
Finally, the most important role of the next-gens will be to give more purpose to the overall business, internally as well as externally.
Internally, next-gens have the responsibility of creating a concrete family succession plan as opposed to the G1s who might have primarily focussed all their energy on business development. Next-gens will be accountable for the drafting of high-quality contracts, deeds, trusts, family offices and generally participating on any other platforms which encourage transparent information sharing and decision-taking regarding the future. They have the golden opportunity to set up a proper governance system, which if done right, can safeguard the family for many generations to come. That includes working as well as non-working members.
Externally, next-gens can and must, create a larger social impact. Interests could range from the environment and education to poverty or healthcare. In today’s world, shareholder prosperity is just one side of the coin and creating social value has become a key indicator of any businesses’ success. Next-gens must engage the business and the family members asking important questions about how they can initiate or be a part of meaningful change that will leave a long-lasting and significant impact. This larger social pillar will support the other two, family and enterprise, ultimately holding the entire structure in place.
If exercised the right way, I genuinely think next-gens are in an ideal position to create maps of the future by using tales from the past, both cautionary and revolutionary. It's imperative to believe you can end up in first place even if you started second.